Caleres, Inc. — Form 10-Q Summary
Period: The filing covers the 13 weeks ended May 4, 2024 (first quarter of fiscal 2024), compared with the 13 weeks ended April 29, 2023. The request metadata says “2023 Q1,” but the filing itself reports 2024 Q1.
Business context and results
Caleres operates Famous Footwear and the Brand Portfolio business, selling footwear through retail stores, e-commerce and wholesale channels. Results are seasonal, and interim performance may not indicate full-year results.
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Net sales | $659.2 million | $662.7 million | Down 0.5% |
| Gross profit / margin | $309.1 million / 46.9% | $302.7 million / 45.7% | Margin up 122 bps |
| Operating earnings / margin | $42.8 million / 6.5% | $49.6 million / 7.5% | Down 13.8% |
| Net earnings attributable to Caleres | $30.9 million | $34.7 million | Down |
| Diluted EPS | $0.88 | $0.97 | Down $0.09 |
| Operating cash flow | $36.1 million | $37.5 million | Down $1.4 million |
Financial position and liquidity
- Cash was $30.7 million at May 4, 2024. Revolver borrowings were $191.0 million, versus $291.5 million a year earlier and $182.0 million at February 3, 2024. The company also had $9.4 million of letters of credit and $299.6 million of additional borrowing availability.
- Working capital was $41.0 million and the current ratio was 1.05:1, compared with negative $58.4 million and 0.93:1 a year earlier. The debt-to-capital ratio was 24.9%, down from 39.2%.
- Operating cash flow of $36.1 million was offset by $10.3 million of investing cash outflow and $16.4 million of financing cash outflow. Cash increased $9.4 million during the quarter.
- Capital expenditures and capitalized software were $10.3 million in the quarter. The company expects 2024 spending of $60–$70 million, versus $49.6 million in 2023.
- Lease obligations totaled $603.0 million, including $120.9 million current and $482.2 million noncurrent. These are separate from revolver borrowings.
Material changes and management commentary
- Famous Footwear sales were $349.6 million, essentially flat year over year; comparable sales declined 2.3%, primarily reflecting lower store traffic. Segment operating earnings were $16.9 million, versus $17.1 million.
- Brand Portfolio sales declined 2.6% to $317.2 million, mainly because of lower wholesale sales. Segment operating earnings fell to $41.4 million from $42.7 million. Owned e-commerce sales grew approximately 8.6% in this segment.
- Consolidated owned e-commerce sales increased approximately 9.4%; direct-to-consumer sales were about 69% of consolidated sales, versus 68% a year earlier.
- Gross margin improved on higher merchandise margins, a richer direct-to-consumer mix, lower discounts and allowances, and lower freight and shrinkage costs. Selling and administrative expense rose 5.2% to $266.3 million, including increased brand marketing, international expansion, and ERP implementation costs; it rose to 40.4% of sales from 38.2%.
- Interest expense declined to $3.8 million from $5.6 million, mainly due to lower average borrowings, partly offset by higher weighted-average rates. Management expects elevated rates to continue pressuring interest expense and expects to keep reducing revolver borrowings.
Outlook, risks and unusual items
- The filing provides no specific revenue, earnings or EPS guidance. Management said operating cash flows are expected to cover material cash requirements for at least the next 12 months and that dividends are presently expected to continue, subject to Board discretion.
- Management cited inflation, high interest rates, consumer debt, recession concerns and lighter store traffic as pressures on discretionary spending. It noted continued weakness in dress footwear and seasonal categories, while fashion sneakers, casual footwear and kids’ products performed better.
- The Brand Portfolio wholesale unfilled order position was $257.0 million, down 5.8% year over year; management attributed the decline to more conservative wholesale customer buying and inventory management.
- The multi-year cloud ERP implementation had $14.5 million of capitalized costs at May 4, 2024; the first phase was scheduled to go live in Q2 2024. Higher IT and consulting costs affected quarterly expenses.
- The company recorded $0.2 million of store-related long-lived asset impairment charges. It continues marketing its headquarters campus, classified as held for sale, and expected a completed sale within the next year; discussions with potential buyers were ongoing.
- Environmental remediation reserve for the Redfield site was $9.2 million. The filing notes that ultimate remediation costs may differ from recorded estimates and could exceed them. Management does not expect ordinary-course litigation to have a material adverse effect.
- Key disclosed risks include changing consumer preferences and spending, inflation and supply-chain disruption, reliance on overseas manufacturing, inventory forecasting, competition, foreign exchange, cybersecurity and information-system disruption, and lease risks.
Important facts for investors to verify
- Whether sales and store traffic stabilize, particularly at Famous Footwear, and whether seasonal footwear demand recovers.
- Whether improved gross margin can be sustained as sales mix and wholesale demand change, while selling and administrative costs remain elevated.
- Progress in reducing revolving borrowings and the impact of variable interest rates on future earnings and liquidity.
- Execution, timing and costs of the ERP go-live and the planned $60–$70 million of 2024 capital spending.
- Wholesale order trends and inventory levels, as well as the outcome and timing of the headquarters campus sale and future Redfield remediation costs.